When to work with a
corporate VC versus a VC firm?

Description

Manju Bansal, VP and Global Head of SAP Startup Focus explains the difference between being funded by a corporate venture capitalist or by an institutional venture capitalist.

Video Transcript

As an entrepreneur I think to work with a corporate accelerator or corporate VC versus an institutional investment firm, a traditional firm, I think both are good options. What we have seen here in our experience of working with startups is – if you are a first-time entrepreneur and you don’t have the deep credibility that traditional VC firms look for when they choose to align whether they will invest in the firm, this becomes a very viable option. More so if your product or service or solution that you are developing is closely aligned strategically to what the corporate entities are about. So, for examples with the SAP, if you’re on the enterprise software space, we’re open to listening to what ideas you have. If you are an entrepreneur who’s identified a clear white space that my customers are looking for solutions on, then I’m even more interested in talking to you.

Once you work with someone like us, you’re able to get access to customers, you get to go through the go-to-market motions, product development. All those things really help you to build credibility, so when you’re finally ready to raise money. You can walk into the traditional VC firm and have a really good portfolio of things to show that can bolster your case substantially. In fact, in our program we weren’t accelerator, we refer companies to the SAP’s own venture firm which is called Sapphire Ventures, and another early investment organization called SAP.io. So it’s a back-and-forth flow that happens and the only person that benefits is the entrepreneur.

Now, I will caution it by one counter logic that the only downside and it’s maybe a downside, maybe not, depends on the situation, for working with a corporate accelerator or a VC firm, is that if your service or solution could be of use to the competitors of this entity that you now have aligned with, then you are potentially foreclosing those options away from you. So if you’re with the SAP, then Oracle’s customers may not want to talk to you, just as an example. It doesn’t happen, I think the world is moving along and people realize the value of true products that can deliver solutions and solve their problems. I think people have moved on beyond this alignment issue but it still comes up every once in a while.